Does IT Matter or Economics

Does IT Matter?: Information Technology and the Corrosion of Competitive Advantage

Author: Nicholas G Carr

A Bold Manifesto on the Future of Information Technology

Over the last decade, and even since the bursting of the technology bubble, pundits, consultants, and thought leaders have argued that information technology provides the edge necessary for business success.

IT expert Nicholas G. Carr offers a radically different view in this eloquent and explosive book. As IT's power and presence have grown, he argues, its strategic relevance has actually decreased. IT has been transformed from a source of advantage into a commoditized "cost of doing business"-with huge implications for business management.

Expanding on Carr's seminal Harvard Business Review article that generated a storm of controversy, Does IT Matter? provides a truly compelling-and unsettling-account of IT's changing business role and its leveling influence on competition.

Through astute analysis of historical and contemporary examples, Carr shows that the evolution of IT closely parallels that of earlier technologies such as railroads and electric power. He goes on to lay out a new agenda for IT management, stressing cost control and risk management over innovation and investment. And he examines the broader implications for business strategy and organization as well as for the technology industry.

A frame-changing statement on one of the most important business phenomena of our time, Does IT Matter? marks a crucial milepost in the debate about IT's future.

May 6, 2004 - New York Times

lays out the simple truths...of information technology in a lucid way, with cogent examples and clear analysis.

April 2004 - The Economist

His argument is simple, powerful and yet also subtle.

May 2, 2004 - Boston Globe

Does IT Matter? engages the imagination and the emotions, a rare combination in a business book.

May 2004 - Financial Times

coolly written [and] intellectually engaging.

May 24th, 2004 - BusinessWeek

The book is a worthwhile guide to where tech is headed for the long term.

eWeek

Carr's work is thorough ... IT thinking rarely gets a contribution of this caliber. Read it. (May 24,2004)

Soundview Executive Book Summaries

In a May 2003 article in the Harvard Business Review entitled "IT Doesn't Matter," Nicholas G. Carr introduced the idea that information technology (IT) does not provide a competitive advantage to companies in a strategic manner. In Does IT Matter?, Carr argues that IT has become a commodity, and because the very nature of strategy requires differentiation, IT cannot possibly qualify. Although IT has made spectacular gains in the last half century, it is no different than other disruptive technologies that have transformed the world since the beginning of the Industrial Revolution. It may have provided a differentiated advantage to some companies early on, but over time IT has grown cheaper and more standardized so that it is easily accessible to everyone.

IT can be used to supplement and improve strategy implementation, but it is not the foundation of a competitive advantage. To handle this new approach to IT, executives will have to prevent the commoditization of IT architecture and applications from destroying their companies' barriers to competitive advantages. Although that role is not yet entirely clear, executives need to prepare for the prospect that IT doesn't matter to strategy.

One of the greatest discoveries of the 20th century was the microprocessor. It dramatically improved the efficiency of the earlier supercomputers and changed the way the world did business. It moved us from mainframes to local area networks to personal computers. It created the proliferation of information technology (IT) and its infrastructure, which were the major forces shaping business over the last 40 years.

Corporate spending habits reflect the great importance of IT to business. In 1965, corporate spending on IT was about 5 percent of capital expenditures. It grew to 15 percent in the 1980s, 30 percent in the early 1990s, and over 50 percent by the turn of the century. Even with the recent slowdown in IT spending due to the bursting of the Internet bubble, the average company still invests as much in IT as in all other capital expenditures combined.

Attitudes and practices changed as well. Twenty years ago, computers were considered suitable only for low-level employees. Now, any senior executive without one is a dinosaur. Once networks and then the Internet emerged, executives finally took notice and focused on the strategic implications of IT on a wide scale and how it could be used to create competitive advantages.

There is an assumption in the business world that the strategic advantage of IT has increased with its ubiquity. This is incorrect. Scarcity, not ubiquity, makes a business resource strategic. By now, the core functions of IT - data storage, data processing, and data transport - are available and affordable to all businesses. It is the cost of doing business for all, but it provides distinction to none. Without distinctiveness, the only basis for competition is pricing, which eventually slashes prices close to cost, and squeezes out profit. Investments in resources that provide differentiation can deliver higher profits, while commodity inputs cannot. Only when a company can distinguish commodity resources from those that have a potential competitive advantage will it avoid wasted cash and strategic dead ends.

The transformation of IT from a source of advantage to the cost of doing business raises many challenges. Executives need to re-examine spending and management of IT and rethink relationships with vendors. Different companies will reach different conclusions, but most will find that as IT merges into general business infrastructure, mitigating risk and controlling cost will become more important than pursuing innovation and new investments.

IT is probably best understood as the latest in a series of broadly adopted technologies that have reshaped industry, such as the steam engine, the railroad, and electricity. All briefly gave competitive advantages to forward-looking companies, but then became commodities. Over time, they mattered less to the competitive fortunes of individual companies.

Information technology is headed in the same direction. As IT's advantage dissipates, its great transformational power fades in a necessary and natural process. Only by becoming a shared and standardized infrastructure will IT deliver its greatest economic and social benefits and fulfill its potential.

Table of Contents:

Preface

Interesting book: Recipe Keeper or 101 Things To Do With Ramen Noodles

Economics: Course Companion

Author: Ian Dorton

Developed in collaboration with the International Baccalaureate Organization, Oxford's Course Companions provide extra support for students taking IB Diploma Programme courses. They present a whole-course approach with a wide range of resources, and encourage a deep understanding of each subject by making connections to wider issues and providing opportunites for critical thinking.
Providing clear and inviting instruction and guidance, this Companion supports students through their Economics course. It includes cross-curricular materials and activities as well as advice and guidance for the portfolio of four commentaries. Examples, features, and case studies drawn from around the world encourage students to develop an international perspective. Includes a section of Development and International Economics Written by experienced authors and teachers, who are both deputy chief examiners Activities and features provide opportunities for learning and discussion around core and wider issues Exam, portfolio, and Extended Essay advice is provided